March 29, 2006

FOMC Round Up: What The Experts Think

Bernanke chose to emphasize continuity over making his own mark today... I suspect that our forecast that the FOMC will ultimately move beyond
5% is going to get a lot more crowded after today. In essence, as has
occurred after practically every FOMC meeting since late 2004, the
market will have to push the goalposts back by some portion of 25 BP. -- Stephen Stanley, RBS Greenwich Capital

The threat of more hikes is given emphasis by the opening paragraph,
which baldly states that the Q4 slowdown was "temporary" and that
growth has "rebounded strongly", though it "appears likely to
moderate". We fully expect a May hike. -- Ian Shepherdson, High Frequency Economics

That a core PCE inflation rate of 1.8% year-over-year (and 1.9% over the past three months) is not described as low is instructive...- Bruce Kasman, J.P. Morgan

... we continue to expect the Fed will keep raising rates, reaching 5.50%
in the third quarter. The Kansas City Fed did not request a 25 basis
point hike in the discount rate. We believe that this is meaningless. -- Drew Matus, Lehman Brothers

Investors were hoping there would be some indication that the
tightening cycle would be coming to an end. Their hopes were dashed. -- Joel L. Naroff, Naroff Economic Advisors

“The market now has greater conviction in its view that US interest
rates will rise to 5 per cent by the summer; but the custom designed
flexibility of the FOMC statement, tempered as it now is with
conditionality and subjectivity, precludes any clear market insight
beyond the next economic data release,” said Neil Mellor, currency
strategist Bank of New York.

"The statement is a little bit different, but the gist of it is pretty
much the same: they'll hike rates if they need to, they'll watch the
data; inflation remains contained," said Mary Ann Hurley, vice
president of fixed income trading at D.A. Davidson in Seattle.

The WSJ feature includes comments from several of our favorite bloggers -- Barry, Mark, and William, specifically -- but why not go to the sources:

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Learning the new Fedspeak
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Econbrowser
Curious reaction from both markets and pundits to yesterday's statement from the FOMC accompanying the decision to boost the fed funds rate another 25 basis points.... [Read More]

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